Introduction: Curious how the 2025 tax law shake‑up affects your refund? You’re not alone. With the “One Big Beautiful Bill” (OBBBA) now signed into law, taxpayers nationwide are scrambling for clarity. In this article, a seasoned CPA shares practical insights into headline provisions—Child Tax Credit, SALT cap, tip/overtime deductions—and explains what it all means for your wallet.
What’s New in Child Tax Credit for the 2025 Tax Law?
Explanation: The 2025 law enhances the Child Tax Credit (CTC), offering more money to families.
- $2,200 per child (under 17) through 2028, up from $2,000
- Fully refundable up to $1,700, benefiting families with little tax liability
- Phase‑out starts at $200K (single) and $400K (joint)
Example: The Smiths (AGI $75K) with two kids now get $4,400 instead of last year’s $4,000—nice boost!
Everything You Need to Know About the 2025 Child Tax Credit Reforms Under Trump
2025 tax law: Can I deduct SALT up to $40K?
Explanation: A temporary expansion lets many homeowners deduct more, but only for a bit.
| Year | SALT Cap |
| 2025–2028 | $40,000 (MgI ≤ $500K) |
| Post‑2028 | $10,000 (reverts) |
Cautions: High earner phase‑out applies; plan soon if your state taxes are steep.
Also read these related topics – 5 Predictions for Trump Tax Plan 2025: What You Need to Know
New Tip & Overtime Deductions—What’s That?
Explanation: Finally, federal tax relief for working folks whose pay isn’t salaried.
- Tip workers can deduct up to $25K (single) or $50K (joint)
- Overtime pay deduction: up to $12.5K (single) / $25K (joint)
- IRS will publish qualifying list and documentation rules by Oct 2, 2025
Practical tip: keep thorough pay stubs—especially if you’re tipped or clocked in overtime.
Trump’s Overtime Tax Proposal 2025: The Truth About Your Extra Earnings
What About Seniors & Car-Loan Deductions?
Explanation: Targeted perks for retirees and car buyers are now a thing.
Article For Seniors – How the One Big Beautiful Bill Impacts Seniors: 9 Essential Takeaways
- “Senior Deduction” up to $6K (individual) or $12K (couple)
- Auto‑loan interest deduction up to $10K for U.S. cars bought 2025–2028
Case study: Jane, 67, used the senior credit and saved $2,400 last April—game‑changer on her fixed income.
How Did Inflation Adjustments Shape 2025?
Explanation: The IRS lifted bracket thresholds and deductions to match price hikes.
- Standard deduction: $15K (single), $30K (joint), $22.5K (HOH)
- New tax brackets prevent “bracket creep”
- Retirement & FSA limits up: 401(k) $23,500; IRA $7,000; HSA $4,300; FSA $3.
Also read, Why US. Inflation Matters—and How to Protect Your Cash
Small Biz & Energy Tax Breaks
Explanation: Entrepreneurs and green homeowners also scored some wins.
- Section 179 increased to $1.3M; bonus depreciation at 60% .
- Pass‑through QBI stays at 20%, threshold bumped to $180K/$360K.
- Energy credits: solar, EVs still eligible up to $7,500.
If you launched a startup in 2025, you may qualify for higher R&D credits—ask your tax pro.
Home Improvements with Energy-Efficient: Tax Credit for Going Green
FAQ on 2025 tax law
1. What are the 2025 income tax brackets?
Rates remain 10–37%, but thresholds rose: e.g., 37% now starts at $626,350 (single).
2. When did the 2025 tax law take effect?
The “One Big Beautiful Bill” was signed into law on July 4, 2025. Most provisions—including SALT changes and Child Tax Credit updates—apply to tax year 2025, while others phase in later or run through.
3. Who qualifies for the expanded SALT deduction?
From 2025–2029, taxpayers with modified AGI up to $500K (single) or $1 M (joint) can deduct up to $40,000 in state and local taxes. Above those thresholds, the cap phases out until reverting to $10K for incomes ≥ $600K.
4. How does the Child Tax Credit work now?
In tax year 2025, the credit is $2,200 per child under 17, with up to $1,700 refundable—AS LONG AS both child and filer have valid SSNs. The credit phases out starting at $200K single / $400K joint AGI.
5. Are tip and overtime deductions included?
Yes—eligible tip workers can deduct up to $25,000 (single) or $50,000 (joint). Overtime earners get up to $12,500 (single) or $25,000 (joint). The IRS must issue occupation guidance by October 2, 2025.
6. What are the income limits for tip/overtime breaks?
Tip deductions phase out for individuals earning over $150K or $300K for couples. Overtime benefits exclude “highly compensated employees” (earning ≈ $160K+).
7. Can seniors still get extra deductions?
Yes—a new Senior Deduction provides up to $6,000 (individual) or $12,000 (couple), with phaseouts at higher income levels. However, these are temporary—2025–2028.
8. Will green energy credits change?
Clean energy incentives are being phased out mid-decade: solar credits end late 2025, EV purchase credits expire September 2025, and EV charger credits by mid-2026 .
9. What happens in 2026 and beyond?
Temporary provisions on SALT, tip/overtime, senior deductions, and car-loan interest expire between 2028–2029, while green energy phase-outs continue. Many benefits return to previous limits without future extensions.
Conclusion & Actionable Takeaways
- ✔ Track tip/overtime income and stash those stubs.
- ✔ If you’re in a high‑tax state, weigh timing state tax payments before 2029.
- ✔ Seniors should claim the new senior deduction—don’t leave it on the table.
- ✔ Entrepreneurs: boost retirement contributions to maximize bracket relief.
- ✔ Keep digital‑asset records tight—IRS is watching closely in 2025
Disclaimer: This is for educational purposes and does not replace personalized tax advice. Tax laws change—consult a CPA or IRS.gov for tailored guidance.
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